Exhibit 10.2
TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT is dated as of June __, 1998, between
COGNIZANT CORPORATION, a Delaware corporation (the "Corporation") and IMS HEALTH
INCORPORATED, a Delaware corporation ("IMS HEALTH") (collectively, the
"Parties").
WHEREAS, the Corporation acting through its direct and indirect
subsidiaries, currently conducts a number of businesses, including, without
limitation, providing television audience measurement services (the "Xxxxxxx
Media Research Business");
WHEREAS, the Board of Directors of the Corporation has determined
that it is appropriate, desirable and in the best interests of the holders of
shares of common stock, par value $0.01 per share, of the Corporation (the
"Cognizant Common Stock"), as well as of the Corporation and its businesses, to
reorganize the Corporation to separate from the Corporation all businesses
currently conducted by the Corporation other than the Xxxxxxx Media Research
Business and to cause such businesses to be owned and conducted, directly or
indirectly, by IMS HEALTH;
WHEREAS, in order to effect the separation, the Board of Directors
of the Corporation has determined that it is appropriate, desirable and in the
best interests of the holders of Cognizant Common Stock, as well as of the
Corporation and its businesses, for the Corporation (i) to take certain steps to
reorganize the Corporation's Subsidiaries (as defined herein) and businesses,
including prior to the Distribution (as defined herein) merging I.M.S.
International, Inc. and IMS America, Inc. with and into IMS HEALTH and (ii) upon
the completion of such reorganization to distribute to the holders of the
Cognizant Common Stock all the outstanding shares of common stock of IMS HEALTH
(the "IMS HEALTH Common Shares"), together with the associated Rights;
WHEREAS, as of the date hereof, the Corporation is the common parent
of an affiliated group of domestic corporations within the meaning of Section
1504(a) of the Code (as defined herein), including members of the IMS HEALTH
Group (as defined herein), and the members of the affiliated group have
heretofore joined in filing consolidated federal Income Tax Returns (as defined
herein);
WHEREAS, as a result of the Distribution, the IMS HEALTH Group will
not be included in the consolidated federal Income Tax Return of the Corporation
for the portion of the year following the Distribution and in future years; and
WHEREAS, the Corporation and IMS HEALTH desire to allocate the Tax
(as defined herein) burdens and benefits of transactions which occurred on or
prior to the Distribution Date (as defined herein) and to provide for certain
other Tax matters, including the assignment of responsibility for the
preparation
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and filing of Tax Returns (as defined herein), the payment of Taxes, and the
prosecution and defense of any Tax controversies.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the Parties hereby agree
as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. General. Capitalized terms used in this Agreement and
not defined herein shall have the meanings that such terms have in the
Distribution Agreement. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the Treasury regulations promulgated thereunder, including any successor
legislation.
(b) "Combined Returns" shall mean all state Income Tax Returns with
respect to which the Corporation files on a combined or unitary basis with some
or all of its Subsidiaries for taxable periods beginning November 1, 1996,
January 1, 1997 and January 1, 1998.
(c) "Consolidated Returns" shall mean all consolidated federal
Income Tax Returns of the affiliated group of which the Corporation is the
common parent for taxable periods beginning November 1, 1996, January 1, 1997
and January 1, 1998.
(d) "Controlled Entity" shall mean any corporation, partnership or
other entity of which another entity (i) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or persons
performing similar functions) (irrespective of whether at the time any other
class or classes of ownership interests of such corporation, partnership or
other entity shall or might have such voting power upon the occurrence of any
contingency) or (ii) is a general partner or an entity performing similar
functions (e.g., a trustee).
(e) "D&B Tax Allocation Agreement" shall mean the Tax Allocation
Agreement dated October 28, 1996 among The Dun & Bradstreet Corporation, the
Corporation and ACNielsen Corporation.
(f) "Deferred Compensation Deduction" shall mean a deduction with
respect to compensation payments and/or the exercise of stock options in IMS
HEALTH by any former employee of the Pre-Distribution Cognizant Group if such
deduction is disallowed for any member of the IMS HEALTH Group and may be
claimed by any member of the NMR Group.
(g) "Distribution" shall mean the distribution on the Distribution
Date to holders of record of shares of Cognizant
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Common Stock as of the Distribution Record Date of the IMS HEALTH Common Shares
owned by the Corporation on the basis of one IMS HEALTH Common Share for each
outstanding share of Cognizant Common Stock.
(h) "Distribution Agreement" shall mean the distribution agreement,
dated as of June __, 1998, between the Corporation and IMS HEALTH.
(i) "Distribution Date" shall mean June 30, 1998.
(j) "Final Determination" shall mean the final resolution of
liability for any Tax for any taxable period, including any related interest or
penalties, by or as a result of: (i) a final and unappealable decision,
judgment, decree or other order by any court of competent jurisdiction; (ii) a
closing agreement or accepted offer in compromise under Section 7121 or 7122 of
the Code, or comparable agreement under the laws of other jurisdictions which
resolves the entire Tax liability for any taxable period; (iii) any allowance of
a refund or credit in respect of an overpayment of Tax, but only after the
expiration of all periods during which such refund may be recovered by the
jurisdiction imposing the Tax; or (iv) any other final disposition, including by
reason of the expiration of the applicable statute of limitations.
(k) "Franchise Tax Returns" shall mean all franchise Tax Returns of
the Pre-Distribution Cognizant Group or any member thereof for taxable periods
beginning November 1, 1996, January 1, 1997, January 1, 1998 and, solely for
purposes of Sections 2.1(a) and 2.2(a), on or the day after the Distribution
Date.
(l) "Governmental Authority" shall mean any federal, state, local,
foreign or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or governmental
authority.
(m) "IMS HEALTH Business" shall mean each and every business
conducted at any time by the Corporation or any Subsidiary of the Corporation
prior to the Effective Time, including, without limitation, (i) providing
information and decision support services to the pharmaceutical and healthcare
industries (the "IMS Business"), (ii) providing software-based administrative
and analytical solutions to the managed care industry (the "ERISCO Business"),
(iii) making venture capital investments in emerging healthcare businesses (the
"Enterprises Business"), (iv) supplying research and analysis to the information
technology industry (the "Gartner Business") and (v) providing software
applications and development services specializing in Year 2000 conversion
services (the "Technology Solutions Business"), but excluding the NMR Business.
(n) "IMS HEALTH Group" shall mean IMS HEALTH and each person (other
than any member of the NMR Group) that is a
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Subsidiary of the Corporation immediately prior to the Effective Time.
(o) "Included Party" shall have the meaning as defined in Section
2.3.
(p) "Income Tax Return" shall mean any Tax Return relating to Income
Taxes.
(q) "Income Taxes" shall mean any federal, state or local Taxes
determined by reference to income or imposed in lieu of income Taxes, such as
Taxes based on net worth or gross receipts.
(r) "Indemnifying Party" shall have the meaning as defined in
Section 3.5(c).
(s) "Indemnitee" shall have the meaning as defined in Section
3.5(c).
(t) "IRS" shall mean the Internal Revenue Service.
(u) "NMR" shall mean Xxxxxxx Media Research, Inc., a Delaware
corporation.
(v) "NMR Assets" shall have the same meaning as such term has in the
Distribution Agreement.
(w) "NMR Business" shall mean (i) the Xxxxxxx Media Research
Business, (ii) the businesses of the members of the NMR Group, (iii) any other
business conducted by the Corporation or any Subsidiary of the Corporation
primarily through the use of the NMR Assets, (iv) the businesses of any Business
Entity acquired or established by or for NMR or any of its Subsidiaries after
the date of this Agreement and (v) the business of the Corporation from and
after the Effective Time.
(x) "NMR Group" shall mean NMR, each Business Entity which is
contemplated to remain or become a Subsidiary of the Corporation or NMR
hereunder, which shall include those identified as such on Schedule 1.1(au)(i)
to the Distribution Agreement, and the Corporation from and after the Effective
Time.
(y) "Non-Combined Returns" shall mean all state and local Income Tax
Returns (other than Combined Returns and any foreign Tax Returns), of the
Pre-Distribution Cognizant Group or any member thereof for taxable periods
beginning November 1, 1996, January 1, 1997, January 1, 1998 and, solely for
purposes of Sections 2.1(a) and 2.2(a), on or the day after the Distribution
Date.
(z) "Nonperforming Party" shall have the meaning as defined in
Section 5.2.
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(aa) "Other Taxes" shall mean all Taxes other than Taxes covered by
a Consolidated Return, a Combined Return, a Non- Combined State or Local Income
Tax Return or a Franchise Tax Return.
(ab) "Parties" shall have the meaning as defined in the recitals
hereto.
(ac) "Person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
(ad) "Post-Distribution Expense Deduction" shall mean any deduction
with respect to an expense paid by a member of the IMS HEALTH Group after the
Distribution Date if such deduction is disallowed for any member of the IMS
HEALTH Group and may be claimed by any member of the NMR Group.
(ae) "Pre-Distribution Cognizant Group" shall mean the Corporation
and all of its Subsidiaries (direct and indirect, domestic and foreign) prior to
the Distribution.
(af) "Preparing Party" shall have the meaning as defined in Section
2.3.
(ag) "Reorganization Tax Payment" shall mean the payment of any Tax
for which IMS HEALTH is liable pursuant to Section 3.3(a) of this Agreement.
(ah) "Reorganizations" shall mean the series of contributions and
distributions of Controlled Entities and assets, transfers and assumptions of
liabilities, and other transactions whereby the NMR Group and the IMS HEALTH
Group are formed and all other Controlled Entities of the Corporation prior to
the Distribution are placed under the control of the appropriate parent
corporation(s) in preparation for the Distribution.
(ai) "Subsidiary" shall mean any entity of which another entity's
ownership satisfies the 80-percent voting and value test defined in Section
1504(a)(2) of the Code, whether directly or indirectly.
(aj) "Tax" or "Taxes" whether used in the form of a noun or
adjective, shall mean taxes on or measured by income, franchise, gross receipts,
sales, use, excise, payroll, personal property, real property, ad-valorem,
value-added, leasing, leasing use or other taxes, levies, imposts, duties,
charges or withholdings of any nature. Whenever the term "Tax" or "Taxes" is
used (including, without limitation, regarding any duty to reimburse another
Party for indemnified taxes or refunds or credits of taxes) it shall include
penalties, fines, additions to tax and interest thereon.
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(ak) "Tax Benefit" shall mean the sum of the amount by which the Tax
liability (after giving effect to any alternative minimum or similar Tax) of a
corporation or group of affiliated corporations to the appropriate taxing
authority is reduced (including, without limitation, by deduction, entitlement
to refund, credit or otherwise, whether available in the current taxable year,
as an adjustment to taxable income in any other taxable year or as a
carryforward or carryback, as applicable) plus any interest from such government
or jurisdiction relating to such Tax liability.
(al) "Tax Item" shall mean any item of income, capital gain, net
operating loss, capital loss, deduction, credit or other Tax attribute relevant
to the calculation of a Tax liability.
(am) "Tax Matters Partner" shall mean the tax matters partner as
defined in section 6231(a)(7) of the Code.
(an) "Tax Returns" shall mean all reports or returns (including
information returns) required to be filed or that may be filed for any period
with any taxing authority (whether domestic or foreign) in connection with any
Tax or Taxes (whether domestic or foreign).
SECTION 1.2. References; Interpretation. References in this
Agreement to any gender include references to all genders, and references to the
singular include references to the plural and vice versa. The words "include",
"includes" and "including" when used in this Agreement shall be deemed to be
followed by the phrase "without limitation". Unless the context otherwise
requires, references in this Agreement to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, such Agreement. Unless the context otherwise requires, the
words "hereof", "hereby" and "herein" and words of similar meaning when used in
this Agreement refer to this Agreement in its entirety and not to any particular
Article, Section or provision of this Agreement.
ARTICLE II. PREPARATION AND FILING OF TAX RETURNS
SECTION 2.1. Predistribution Tax Returns.
(a) IMS HEALTH (or its relevant Controlled Entity) shall prepare,
and the Corporation (or its relevant Controlled Entity) shall file, (i) all
Consolidated Returns, Combined Returns, Non-Combined Returns, and Franchise Tax
Returns that are not filed prior to the Distribution Date and (ii) any Tax
Returns of any partnership (other than NMR Licensing Associates LP) of which the
Corporation or any Subsidiary is the Tax Matters Partner if a distributive share
of partnership income or loss is included in any such Return.
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(b) All Tax Returns for Other Taxes for periods beginning prior to
the Distribution Date that are not subject to the D&B Tax Allocation Agreement
shall be prepared and filed by IMS HEALTH if they relate to any member of the
IMS HEALTH Group and, otherwise, by the Corporation.
SECTION 2.2. Post-Distribution Tax Returns.
(a) The filing of all Tax Returns for periods beginning on or after
the Distribution Date (other than Non-Combined Returns and Franchise Tax
Returns covered by Section 2.1(a)) shall be the responsibility of the
Corporation if they relate to the NMR Group or any member thereof and shall be
the responsibility of IMS HEALTH if they relate to the IMS HEALTH Group or any
member thereof.
(b) In the case of any partnership in which a member of the
Pre-Distribution Cognizant Group is the designated Tax Matters Partner, such
entity shall continue to be responsible for the preparation and filing of such
partnership's Tax Returns.
SECTION 2.3. Manner of Preparation.
(a) To the extent any Tax Return includes Taxes relating to a Party
(or any of its Subsidiaries) other than the Party preparing such Tax Return (the
"Preparing Party"), the Party not responsible for preparing the Tax Return (the
"Included Party"), shall prepare and deliver to the Preparing Party, at least
120 days prior to the due date (including extensions) of such Tax Return, a true
and correct accounting of all relevant Tax Items relating to the Included Party
(and any of its Subsidiaries) for the taxable period.
(b) All Tax Returns filed on or after the Distribution Date shall be
prepared on a basis that is consistent with the rulings obtained from the IRS or
any other Governmental Authority in connection with the Reorganizations or
Distribution (in the absence of a controlling change in law or circumstances)
and shall be filed on a timely basis (including pursuant to extensions) by the
Party responsible for such filing under this Agreement. In the absence of a
controlling change in law or circumstances and unless deviation from past
practice would have no adverse effect on the other Party, all Tax Returns filed
within three years after the Distribution Date shall be prepared on a basis
consistent with the elections, accounting methods, conventions, assumptions and
principles of taxation used for the most recent taxable periods for which Tax
Returns involving similar Tax Items have been filed; provided, however, that a
Party preparing any Tax Return that does not conform to such past practices
shall not be liable for any additional Tax liability imposed, in whole or in
part, as a result of such deviation from past practice if: (i) 30 days prior to
the filing of such Tax Return, the Party preparing such Tax Return notifies the
other Party if such other Party may be adversely affected; and (ii) the
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Party preparing such Tax Return establishes that conformity with past practice
involves a significant risk of the imposition of a penalty. Subject to the
provisions of this Agreement, all decisions relating to the preparation of Tax
Returns shall be made in the sole discretion of the Party responsible under this
Agreement for its preparation; provided, however, that the "Included Party"
shall have the right to review and comment on such Tax Return prior to the
filing thereof in the following manner:
The Preparing Party shall submit any part of such Tax Return
relating to the Included Party (or any of its Subsidiaries) to the Included
Party at least 28 days prior to the date on which such Tax Return is due
(including extensions). The Included Party shall submit its comments to the
Preparing Party within 14 days of receipt of the relevant portions of such Tax
Return. The Preparing Party shall alter such Tax Return to reflect the
reasonable comments of the Included Party unless the Preparing Party reasonably
believes that such alteration would have an adverse impact upon the Preparing
Party.
(c) Unless otherwise required by the IRS, any Governmental Authority
or a court, the Parties hereby agree to file all Tax Returns, and to take all
other actions, in a manner consistent with the position that the Distribution
Date is the last day on which any member of the IMS HEALTH Group was included in
the Pre-Distribution Cognizant Group. For any period that includes but does not
end on the Distribution Date, to the extent permitted by law or administrative
practice, the taxable year of each member of the Pre-Distribution Cognizant
Group and any group of such members shall be treated as ending on the
Distribution Date.
ARTICLE III. PAYMENT OF TAXES
SECTION 3.1. Predistribution Taxes
(a) The Party responsible for the filing of any Tax Return pursuant
to Sections 2.1 and 2.2 shall pay to the relevant taxing authority all Taxes due
or payable in connection therewith; provided, that if, pursuant to this Article
III, one Party is liable for any Taxes relating to a Tax Return filed by the
other Party, such non-filing Party shall pay the filing Party the amount of such
Taxes at least 5 days prior to the due date (including extensions) of such Tax
Return.
(b) With respect to any Consolidated Return, Combined Return,
Non-Combined Return or Franchise Tax Return for a taxable period ending before
January 1, 1998 that is not filed prior to the Distribution Date, IMS HEALTH
shall be liable for all Taxes payable with such Return and shall be entitled to
any refund or credit for an overpayment of Taxes shown on such Return. With
respect to any Consolidated Return, Combined Return, Non-Combined Return or
Franchise Tax Return for a taxable period beginning on
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or after January 1, 1998, IMS HEALTH (i) shall only be liable for Taxes payable
with such Return that are attributable to the portion of such taxable period up
to and including the Distribution Date and that exceed the amount of Taxes paid
in respect of such taxable period (as estimated Taxes or otherwise) on or prior
to the Distribution Date and (ii) shall be entitled to any refund or credit of
Taxes to the extent Taxes paid in respect of such taxable period (as estimated
Taxes or otherwise) on or prior to the Distribution Date exceed the amount of
Taxes attributable to the portion of the period up to and including the
Distribution Date. The determination of the amount of Taxes attributable to the
portion of such taxable period up to and including the Distribution Date shall
be done on a closing of the books basis, except that Tax Items calculated on an
annual basis shall be apportioned on a time basis.
(c) In the event of any Final Determination adjusting the amount of
any Taxes that are the subject of a Consolidated Return, Combined Return,
Non-Combined Return or Franchise Tax Return, IMS HEALTH shall be liable for its
share of any increases in Taxes and shall be entitled to its share of any
refunds or credits of Taxes, and the Corporation shall be liable for all other
increases in Taxes and shall be entitled to all other refunds or credits of
Taxes. IMS HEALTH's share of any Taxes, credits or refunds shall be determined
in accordance with the following principles:
(i) IMS HEALTH shall be liable for any increase in Taxes, and shall
be entitled to all refunds or credits of Taxes, that are attributable to a Tax
Return that relates solely to the IMS HEALTH Business; and
(ii) In the case of any Tax Return that relates to both the IMS
HEALTH Business and the NMR Business, IMS HEALTH's share of any increase in
Taxes, or refunds or credits of Taxes, shall be determined on a pro forma basis
as if IMS HEALTH filed a separate Tax Return for the taxable period that (i)
included only (x) the Tax Items attributable to the IMS HEALTH Business
otherwise included in the Tax Return and (y) an appropriate allocation of Tax
Items not specifically attributable to either the IMS HEALTH Business or the NMR
Business (including, without limitation, corporate overhead) and (ii) credits
IMS HEALTH with its share of Taxes previously paid by the Corporation or IMS
HEALTH with respect to such taxable period;
provided, that, in the case of a Consolidated Return, Combined Return,
Non-Combined Return or Franchise Tax Return, IMS HEALTH shall be liable for and
shall pay all increases in Taxes, and shall be entitled to receive all refunds
or credits of Taxes, that result from a Tax Item or position determined by the
Corporation's corporate office.
(d) The Corporation shall be liable for all Other Taxes that are
attributable to the NMR Business and IMS HEALTH
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shall be liable for all Other Taxes that are attributable to the IMS HEALTH
Business.
(e) In the case of any Consolidated Return, Combined Return,
Non-Combined Return or Franchise Tax Return with respect to which IMS HEALTH has
responsibility for any Taxes or is entitled to any refunds or credits of Taxes
pursuant to Section 3.1(c) above, IMS HEALTH shall have the right to prepare an
amended Tax Return. The Corporation shall have the right to review any such
amended Tax Return and shall be required to sign and file any such amended Tax
Return unless it reasonably determines that the filing of such amended Tax
Return would create a significant risk of a material increase in the Taxes
payable by the NMR Group or any member thereof for any taxable period beginning
on or after the Distribution Date. IMS HEALTH shall be entitled to any refunds
or credits of Taxes relating to any such amended Tax Return.
(f) If the Corporation is liable for any Taxes or entitled to any
refunds or credits of Taxes pursuant to the D&B Tax Allocation Agreement, such
Taxes, refunds or credits shall be allocated between the Corporation and IMS
HEALTH in accordance with the principles of this Section 3.1.
(g) Notwithstanding any statement herein to the contrary, any Taxes
covered by Section 2.1(j)(i) of the Distribution Agreement shall be governed by
Schedule 2.1(j)(i) to the Distribution Agreement.
SECTION 3.2. Post-Distribution Taxes. Unless otherwise provided in
this Agreement:
(a) The Corporation shall pay all Taxes and shall be entitled to
receive and retain all refunds of Taxes attributable to the NMR Group or any
member thereof:
(i) with respect to a Consolidated Return, Combined Return,
Non-Combined Return or Franchise Tax Return for a taxable period that begins
prior to the Distribution Date and includes but does not end on the Distribution
Date to the extent such Taxes or refunds are attributable to the portion of such
period after the Distribution Date; and
(ii) with respect to periods beginning on or after the
Distribution Date.
(b) IMS HEALTH shall pay all Taxes and shall be entitled to receive
and retain all refunds of Taxes with respect to periods beginning on or after
the Distribution Date that are attributable to the IMS HEALTH Group or any
member thereof.
SECTION 3.3. Restructuring Taxes.
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(a) Notwithstanding any statement to the contrary in this Agreement
and except as otherwise provided in the Distribution Agreement, to the extent
that any Taxes are found to arise out of the Reorganizations, then any such Tax
liability incurred by the Parties (or any of their Subsidiaries) shall be the
responsibility of IMS HEALTH; provided, however, that to the extent specific
cash allocations for such Taxes are made in connection with the Distribution,
IMS HEALTH shall be relieved of its liability for such Taxes to the extent
covered by such cash.
(b) Notwithstanding any statement herein to the contrary, any Taxes
relating to or arising out of the Distribution shall be governed by Section 2.10
of the Distribution Agreement.
SECTION 3.4. Gain Recognition Agreements. In the event that the IMS
HEALTH Group transfers, liquidates or otherwise disposes of the stock or assets
of any entity listed on Schedule 3.4(a) and such transfer, liquidation or
disposition results in the Corporation recognizing gain pursuant to a gain
recognition agreement under Section 367(a) of the Code, then IMS HEALTH shall be
liable for any resulting Taxes, including interest, that the Corporation is
required to pay.
SECTION 3.5. Indemnification.
(a) Indemnification by the Corporation. The Corporation shall
indemnify, defend and hold harmless IMS HEALTH (and its affiliates) from and
against any and all Tax liabilities allocated to the Corporation by this
Agreement.
(b) Indemnification by IMS HEALTH. IMS HEALTH shall indemnify,
defend and hold harmless the Corporation (and its affiliates) from and against
any and all Tax liabilities allocated to IMS HEALTH by this Agreement.
(c) Indemnity Payments.
(i) To the extent that one Party (the "Indemnifying Party") owes
money to another Party (the "Indemnitee") pursuant to this Section 3.5, the
Party (the "Notifying Party") having knowledge of such obligation shall notify
the other Party and shall provide such other Party with its calculations of such
obligation (as specified in Article II and Article III). The other Party, within
14 days after receiving the Notifying Party's calculations, shall submit to the
Notifying Party such other Party's calculations of the amount required to be
paid pursuant to this Section 3.5, showing such calculations in sufficient
detail so as to permit the Notifying Party to understand the calculations. The
Indemnifying Party shall pay the Indemnitee, no later than the later of 5 days
prior to the due date (including extensions) of the relevant Tax Returns and 14
days after the Notifying Party receives the other Party's calculations, the
amount for which the Indemnifying Party is
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required to pay or indemnify the Indemnitee under this Section 3.5. The
Indemnifying Party shall have the right to disagree with the Indemnitee's
calculations. Any dispute regarding such calculations shall be resolved in
accordance with Section 5.4 of this Agreement.
(ii) All indemnity payments shall be calculated on a pre-Tax basis
and shall be treated as contributions to capital and/or dividends immediately
prior to the Distribution.
ARTICLE IV. TAX ATTRIBUTES AND REORGANIZATION TAX PAYMENTS
SECTION 4.1. Carrybacks. In the event of the realization of any
deduction, loss or credit by a Party for any taxable period beginning on or
after the Distribution Date, the Party realizing such deduction, loss or credit
may, in its sole discretion, and to the extent permitted under applicable Tax
law, elect to either carry back or carry forward such deduction, loss or credit.
Any refund attributable to such carryback shall be allocable to such Party. In
the event both Parties elect to carry back an amount to the same taxable period
beginning prior to the Distribution Date, any refund shall be apportioned
between the Parties based on the relative carryback amounts.
SECTION 4.2. Reorganization Tax Payments, Deferred Compensation
Deductions and Post-Distribution Expense Deductions.
(a) If an audit or other examination of any federal, state or local
Tax Return for any taxable period shall result (by settlement or otherwise) in a
Deferred Compensation Deduction or Post-Distribution Expense Deduction in favor
of the NMR Group or any member thereof or if any Reorganization Tax Payment in
favor of the NMR Group or any member thereof is made by IMS HEALTH, then:
(i) If necessary, IMS HEALTH shall notify the Corporation and shall
provide the Corporation with adequate information so that it can reflect on the
appropriate Tax Returns any resulting increases in deductions, losses or Tax
credits or decreases in income, gains or recapture of Tax credits;
(ii) The Corporation shall pay IMS HEALTH the amount of any Tax
Benefit that results from any adjustments relating to such Reorganization Tax
Payment or from such Deferred Compensation Deduction or Post-Distribution
Expense Deduction within 30 days of the date such Tax Benefits are realized;
(iii) Notwithstanding the foregoing, the Corporation shall only be
required to take steps to obtain such Tax Benefit or to pay IMS HEALTH if, in
the opinion of the Corporation's Tax counsel, which counsel shall be reasonably
acceptable to IMS HEALTH, the reporting of such Tax Benefit shall not subject
the Corporation to the imposition of a penalty.
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(b) Realization of Tax Benefits.
(i) For purposes of this Section 4.3, a Tax Benefit shall be deemed
to have been realized at the time any refund of Taxes is received or applied
against other Taxes due, or at the time of filing of a Tax Return (including any
Tax Return relating to estimated Taxes) on which a loss, deduction or credit is
applied in reduction of Taxes which would otherwise be payable; provided,
however, that where the NMR Group or any member thereof has other losses,
deductions, credits or similar items available to it, such deductions, credits
or similar items may be applied prior to the use of any adjustments relating to
a Reorganization Tax Payment or any Deferred Compensation Deduction or Post-
Distribution Expense Deduction.
(ii) The Corporation may, at its election, pay the amount of any Tax
Benefit to IMS HEALTH rather than filing amended returns or otherwise reflecting
adjustments or taking positions on its Tax Returns. If such an election is made,
the Corporation will be treated as having realized a Tax Benefit at the time it
would have realized a Tax Benefit had it chosen to file amended returns or
otherwise to reflect adjustments or to take positions on its Tax Returns.
(c) Tax Benefits Subsequently Denied. If any Tax Benefit realized
pursuant to Section 4.3(b)(i) is subsequently denied, then IMS HEALTH shall
refund the amount of any payment for such Tax Benefit within 30 days of its
notification by the Corporation that a Final Determination has been reached
denying the claimed Tax Benefit.
SECTION 4.3. Competent Authority Relief. If as a result of any audit
of a taxable period beginning prior to the Distribution Date, a Party (or
Subsidiary) is required to adjust its income, deductions, credits or allowances
under Section 482 of the Code or under similar principles in a foreign
jurisdiction, and the payment of additional Taxes in accordance with such a
determination allows the other Party (or Subsidiary) to obtain competent
authority relief as a result thereof, then the Party eligible to obtain such
relief shall: (a) execute or cause to be executed any powers of attorney or
other documents necessary to enable the other Party to pursue such relief at its
own expense; and (b) cooperate with the other Party and the competent
authorities in seeking such relief.
ARTICLE V. TAX AUDITS, TRANSACTIONS AND OTHER MATTERS
SECTION 5.1. Tax Audits and Controversies. In the case of any audit,
examination or other proceeding ("Proceeding") brought against a Party (or
Subsidiary) with respect to Taxes for which the other Party is or may be liable
pursuant to this Agreement, the Party subject to such Proceeding shall promptly
inform such other Party and shall execute or cause to be executed any powers of
attorney or other documents necessary to enable the
14
other Party to take all actions desired with respect to such Proceeding to the
extent such Proceeding may affect the amount of Taxes for which the other Party
is liable pursuant to this Agreement. Each Party shall have the right to
control, at its own expense, the portion of any such Proceeding that relates to
Taxes for which such Party is or may be liable pursuant to this Agreement;
provided, however, that such Party shall consult with the other Party with
respect to any issue that may affect the other Party (or Subsidiary). The Party
in control of such Proceeding or any part thereof shall not enter into any final
settlement or closing agreement that may adversely affect the other Party (or
Subsidiary) without the consent of such other Party, which consent may not
unreasonably be withheld. Where consent to any final settlement or closing
agreement is withheld, the Party withholding consent shall continue or initiate
further proceedings, at its own expense, and the liability of the Party in
control of such Proceeding shall not exceed the liability that would have
resulted from the proposed closing agreement or final settlement (including
interest, additions to Tax and penalties which have accrued at that time).
SECTION 5.2. Cooperation. The Corporation and IMS HEALTH shall
cooperate with each other in the filing of any Tax Returns and the conduct of
any audit or other proceeding and each shall execute and deliver such powers of
attorney and other documents and make available such information and documents
as are necessary to carry out the intent of this Agreement. To the extent such
cooperation involves the services of officers, directors, employees, or agents
of a Party, such services shall be made available in accordance with Section 2.9
of the Distribution Agreement. Each Party agrees to notify the other Party of
any audit adjustment that does not result in Tax liability but can reasonably be
expected to affect Tax Returns of the other Party or any of its Subsidiaries.
Notwithstanding any other provision of this Agreement, if a Party (the
"Nonperforming Party") fails to give its full cooperation and use its best
efforts in the conduct of an audit or other proceeding as provided by this
Section 5.2, and such failure results in the imposition of additional Taxes for
the period or periods involved in the audit or other proceeding, the
Nonperforming Party shall be liable in full for such additional Taxes.
SECTION 5.3. Retention of Records; Access. Beginning on the
Distribution Date, the Corporation and IMS HEALTH shall, and shall cause each of
their Controlled Entities to:
(a) retain adequate records, documents, accounting data and other
information (including computer data) necessary for the preparation and filing
of all Tax Returns required to be filed by any member of the Pre-Distribution
Cognizant Group or any combination of such members and for any audits and
litigation relating to such Tax Returns or to any Taxes payable by any member of
the Pre-Distribution Cognizant Group or any combination of such members; and
15
(b) give to the other Party reasonable access to such records,
documents, accounting data and other information (including computer data) and
to its personnel and premises, for the purpose of the review or audit of such
reports or returns to the extent relevant to an obligation or liability of a
Party under this Agreement and in accordance with the procedures provided in
Article IV of the Distribution Agreement. The obligations set forth in these
paragraphs 5.3(a) and 5.3(b) shall continue until the final conclusion of any
litigation to which the records and information relate or until expiration of
all applicable statutes of limitations, whichever is longer.
SECTION 5.4. Dispute Resolution. Any dispute or claim arising out
of, in connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any way related to this Agreement, shall be resolved in the manner set
forth in Article VI of the Distribution Agreement.
SECTION 5.5. Confidentiality; Ownership of Information; Privileged
Information. The provisions of Article IV of the Distribution Agreement relating
to confidentiality of information, ownership of information, privileged
information and related matters shall apply with equal force to any records and
information prepared and/or shared by and between the Parties in carrying out
the intent of this Agreement.
ARTICLE VI. MISCELLANEOUS
SECTION 6.1. Complete Agreement; Construction. This Agreement,
including the Exhibits and Schedules, shall constitute the entire agreement
between the Parties with respect to the subject matter hereof and shall
supersede all previous negotiations, commitments and writings with respect to
such subject matter. In the event of any inconsistency between this Agreement
and any Schedule hereto, the Schedule shall prevail.
SECTION 6.2. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the Parties and delivered to the other Party.
SECTION 6.3. Survival of Agreements. Except as otherwise provided by
this Agreement, all covenants and agreements of the Parties contained in this
Agreement shall survive the Distribution Date.
SECTION 6.4. Expenses. Except as otherwise set forth in this
Agreement, all costs and expenses in connection with the preparation, execution,
delivery and required implementation of this Agreement shall be charged to and
paid by the Parties in accordance with Section 8.5 of the Distribution
Agreement.
16
SECTION 6.5. Notices. All notices and other communications hereunder shall
be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the Parties at
the following addresses (or at such other addresses for a Party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
To the Corporation:
Xxxxxxx Media Research, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy:
Attn: Chief Legal Officer
To IMS HEALTH:
000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: General Counsel
and
Vice President - Taxes
SECTION 6.6. Waivers. The failure of any Party to require strict
performance by any other Party of any provision in this Agreement will not waive
or diminish that Party's right to demand strict performance thereafter of that
or any other provision hereof.
SECTION 6.7. Amendments. This Agreement may not be modified or
amended except by an agreement in writing signed by each of the Parties hereto.
SECTION 6.8. Assignment. This Agreement shall not be assignable, in
whole or in part, directly or indirectly, by any Party hereto without the prior
written consent of the other Party hereto, and any attempt to assign any rights
or obligations arising under this Agreement without such consent shall be void.
SECTION 6.9. Successors and Assigns. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the Parties and their respective successors and permitted assigns.
SECTION 6.10. Termination. This Agreement may be terminated,
amended, modified or abandoned at any time prior to the Distribution by and in
the sole discretion of the Corporation without the approval of IMS HEALTH or the
stockholders of the Corporation. In the event of such termination, neither Party
17
shall have any liability of any kind to the Party or any other person. After the
Distribution, this Agreement may not be terminated except by an agreement in
writing signed by the Parties.
SECTION 6.11. Controlled Entities. Each of the Parties hereto shall
cause to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Controlled
Entity of such Party or by any entity that is contemplated to be a Controlled
Entity of such Party on and after the Distribution Date.
SECTION 6.12. Third Party Beneficiaries. This Agreement is solely
for the benefit of the Parties hereto and their respective Subsidiaries and
should not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 6.13. Title and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
SECTION 6.14. Exhibits and Schedules. The Exhibits and Schedules
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
SECTION 6.15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
SECTION 6.16. Consent to Jurisdiction. Without limiting the
provisions of Section 5.4 hereof, each of the Parties irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
York County, and (b) the United States District Court for the Southern District
of New York, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby. Each of the
Parties agrees to commence any action, suit or proceeding relating hereto either
in the United States District Court for the Southern District of New York or if
such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of the Parties further agrees that service of any process, summons,
notice or document by U.S. registered mail to such Party's respective address
set forth above shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 6.17. Each of the Parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or
18
proceeding arising out of this Agreement or the transactions contemplated hereby
in (i) the Supreme Court of the State of New York, New York County, or (ii) the
United States District Court for the Southern District of New York, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
SECTION 6.17. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The Parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed as of the day and year first above written.
COGNIZANT CORPORATION
By:
----------------------
Name:
Title:
IMS HEALTH INCORPORATED
By:
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Name:
Title:
